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Currency crisis


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Most big clearing firms are also trading firms. Bear Sterns was either the largest or second largest clearing firm at the time of its demise.

Separate special purpose entity under the same corporate group.

 

The clearing entity does not guarantee the trading entity, such that the failure of the trading entity will not result in a claim on the clearing entity's assets. This is a critical factor in exchange traded markets. Exchange traded is less / not prone to credit related systematic failure specifically due to the novation and clearing process. All credit risk lies with the exchange, rather than individual participants.

 

A great example of an exchange traded non-meltdown was the Bearings Bank collapse. All contracts were honoured due to the margining and clearing process, in spite of Bearings collapse. There was no haircut for the guys on the other end.

 

OTC deals on the other hand leave the credit risk on the counterparty directly. Think Lehmann.

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Yeah... I don’t need to believe, because I know.

 

I’ll leave beliefs for the tin foil retail trader crew who pay it through the aSS and complain about manipulation as an excuse for their persistent losses.

 

Douche bags.

 

 

I am glad to hear you know the difference between believing and knowing just like those real smart Nobel prize guys over at LTCM who used a similar trading strategy to what you have posted here' :rolleyes:

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